But the method and mindset that works best for each individual trader... depends on each trader’s individual personality. Even stocks have their own personalities. You only have to look at the charts and setups of specific stocks to see that each has an individual trading personality (or vibration). Just like how people find others they have an affinity for, traders find stocks and setups that fit their personality.
Likewise, individuals find some people they cannot stand and counter to their personal wellbeing and so they avoid them. It's the same thing with trading. Traders find certain stocks and setups to be the same way. We all seek alignment. If a trader loses money consistently in a symbol, the wise trader puts it on the personal “do not trade” list. The same can be said of chart patterns and trade set-ups.
If a trader is finding a set-up isn't performing as expected...they pause using it. Not all chart patterns work for each day trader, each has its own personality.
For example:
Are you a Breakout trader?
Do you like to trade stocks that make new highs?
Are you patient and a swing trader?
Do you leave trades on a few days or weeks to develop?
Are you a deep value trader?
Can you hold indefinitely waiting for your move?
Are you a technical trader?
Do you rely on charts?
Below we have chosen a few charts that depict different set-ups.
Which chart fits your style?
Which set-up and expected price action fits your desired style and trading personality?
We advise aligning your personality with the types of trades & set-ups and timeframes that reward your personality traits.
Price is irrelevant in this exercise; it is the chart pattern that is important. The examples below are not trade recommendations but are being used for instruction and discussion purposes only.
The Breakout/ New High Trade
TSLA – Broke out in late November 2020 above 502.49 after a two-month base (the longer the base the more significant) and proceeded to 900.00 by late January 2021. A breakout trader could have traded this on a daily basis going to cash by end of the day. Or held a long position with a trailing stop.
The Swing Trade
MMM- With close to 20 significant highs and lows (swings) from August alone. The swing trader involved in this instrument would be looking for the rhythm in the swings, looking to take out the middle 60% or better of each move. Tough and nimble style is required here but it's doable.
The Deep Value Base Trade
XLE- This sector was hard-hit in 2020 by the recent investment paradigm of the Covid-19 economic lockdown. As a proxy for Growth, oil demand collapsed, but for those with a longer perspective, there was a lot of deep value opportunity in the panic of March 2020. Then again during the mutual fund fiscal year-end where money managers threw the “baby out with the bathwater” with tax selling in late October. For those who like to buy oversold fundamentally sound stocks and sectors-there were swing and investor trades out there.
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